Creating a Culture of Citizenship Supply Chain Management
Employees of the international sustainable shipping company TNT are embedded at Abbott’s warehouse in Heerlen, Netherlands. They work alongside our own Abbott staff to ensure safe, accurate shipping of critical vascular supplies.
Supplier relationships are integral to Abbott’s success – as a business and as a corporate citizen. We work closely with our suppliers to ensure high levels of performance in all aspects of quality, compliance and social responsibility. We communicate with our suppliers regularly, monitoring and helping them enhance performance according to well-defined metrics.
Managing Supplier Quality and Dependability
Abbott seeks to engage suppliers in a process of continual learning and improvement, using formal management reviews and performance audits aimed at improving their systems as well as our own. We work closely with our suppliers to ensure that the materials we purchase from them comply with our expectations for quality and safety, as well as our technical specifications. We also partner with suppliers to help them improve their social responsibility programs and results.
With a supply chain composed of more than 20,000 suppliers and an estimated spend of $8 billion, Abbott uses a risk-based approach to ensure that we apply the appropriate level of focus and rigor in our supply chain management process. We establish carefully designed metrics to evaluate the performance of both global and local suppliers against mutually agreed-upon expectations. Additionally, we apply special focus to a subset of about 40 percent of our total supply base, which is responsible for the raw materials that most directly impact product quality. Over the past two years, Abbott has completed more than 1,000 on-site supplier quality audits.
All Abbott suppliers are provided access to our Supplier Guidelines, which are published in multiple languages. These guidelines set forth our expectations for suppliers in the following areas: ethical behavior, business integrity and fair competition, human rights, privacy, labor rights and worker protection, animal welfare, environmental stewardship, and health and safety practices. Our new Resources for Suppliers Web site includes answers to Frequently Asked Questions (FAQs) related to social responsibility and provides insights into Abbott’s expectations for suppliers.
A subset of suppliers are selected for inclusion in our Supplier Performance Program, which is designed to both drive innovation among strong performers and to encourage higher performance levels among suppliers experiencing challenges. Suppliers are selected for inclusion based on key business needs – worldwide scope of service, previous performance against expected service levels and other criteria. Selected suppliers are closely measured throughout the year in the areas of financial risk, adherence to social responsibility, business metrics of delivery and quality performance, and product and process innovation. Our investment in automated scorecarding allows us to quickly identify and resolve performance shortfalls and to reward outstanding performance. In 2012, we recognized 21 supplier companies with our Supplier Excellence Award, showcasing their exceptionally strong performance and continuous improvement.
Managing Supplier Social Responsibility
Abbott also has intensified our focus on monitoring and managing suppliers’ social responsibility performance in recent years, establishing a special program at the corporate level to assist suppliers in meeting our expectations in such critical areas as employee health and safety, fair labor practices, diversity, ethics and environmental stewardship.
Our Global Purchasing compliance team proactively identifies suppliers in high-risk industries, geographies and spend categories, conducting intensive screening in emerging markets. We survey suppliers using principles set forth by the Pharmaceutical Supply Chain Initiative (PSCI), an industry consortium dedicated to advancing consistent expectations within the supply chain related to social issues. Based on survey results, Abbott may perform a higher level of scrutiny – including additional on-site audits. Audits of high-risk suppliers are conducted to confirm that these suppliers provide:
- Safe working conditions
- Dignified and respectful treatment of employees
- Responsible manufacturing processes
- Adequate management systems
- Ethical practices
Abbott routinely audits suppliers to ensure that they meet our expectations both for product quality and for social responsibility standards such as ethics, management systems, employee health and safety and environmental performance. We use a risk-based process to select suppliers for on-site audits, and we apply intensive screening in emerging markets where risks may be higher.
In 2011, we implemented multiple process improvements to fortify our supplier social responsibility program. These enhancements include a more sophisticated supplier classification model, a quarterly results tracking scorecard and a semi-automated audit report – along with a new process for increasing awareness of the program across our multiple businesses and geographies.
Each year Abbott aims to audit at least 300 suppliers as part of this initiative. These audits occur in addition to more traditional audits for quality and adherence to specifications. In 2012, we augmented our supplier social responsibility audit program with third-party audits designed to assess a larger number of suppliers based outside the United States, targeting the high-risk countries identified in our supplier classification model.
As with our own workforce, Abbott believes diversity in our suppliers is essential to our ability to compete globally. We are committed to purchasing from a diverse base of suppliers, including small businesses and those owned by minorities, women, veterans, service-disabled veterans and Indian tribes, as well as nonprofits and businesses located in Historically Underutilized Business Zones. We encourage all suppliers who produce the products and services we need to contact us, regardless of size or ownership.
In 2012, Abbott purchased nearly $2.2 billion in goods and services from more than 1,500 small and diverse suppliers in the United States. We work with numerous U.S. advocacy organizations promoting diverse businesses, and we actively source potential suppliers from local, regional and national outreach events designed to bring together diverse suppliers and corporations. In 2012, we continued our focus on the selection of suppliers who are veterans or service-disabled veterans, participating in the national convention of veteran businesses and mentoring a service-disabled veteran supplier.
In 2011, Abbott published a new Green Procurement Policy. Among other standards, the policy advocates procurement considerations of environmentally preferable goods and services in order to help minimize potential harmful effects on human health and the environment.
Multiple Abbott business units and operational teams have partnered with their suppliers over the past year to improve the environmental stewardship of specific goods and services we purchase. For example, we work closely with a nutrition ingredient supplier that operates one of the world’s most advanced water recycling facilities at its California site. This supplier facility takes in about 5 billion pounds of cow’s milk each year. Through the use of water reclamation, the supplier is able to liberate a large volume of water from the milk – providing a new source of water for the farms and crops of central California. More than half the total water usage in this supplier’s facility comes from two recycled sources: water that is skimmed from cow’s milk after the nutrients are extracted for processing, and recycled water from the supplier’s reclamation facility. This recycled water is used for a variety of nonfood purposes, including cleaning and sanitation of manufacturing equipment, crop irrigation, cooling towers and boilers. We are proud to work with suppliers like this one, who share our focus on environmental stewardship, and we routinely partner with these suppliers to exchange ideas about additional environmental programs and activities.
Along with our efforts to protect the environment through green sourcing, we are committed to responsible disposal of goods and materials at the end of their life cycle. In 2012, our electronic waste recycling program surpassed over 95 percent of all the computers in the United States, as well as over 50 percent of all the computers in Europe. Last year, the Abbott eWaste program generated more than 595,000 pounds of electronic equipment such as computers, printers, servers, monitors, telephones, copiers and fax machines. Proper recycling of this equipment is important because the equipment often contains toxic materials like lead and mercury that can leach into the environment when not disposed of properly. To ensure that this eWaste is handled appropriately, our certified eWaste suppliers dispose of electronic assets; recover and reuse relevant parts; and recycle parts that cannot be reused. Our suppliers first conduct a rigorous sanitization process to ensure that Abbott data is permanently erased from the electronic equipment we send them. Then they repair, test and refurbish this electronic equipment for resale. All items not fit for reuse are de-manufactured and the materials are sorted into the appropriate commodity streams, where they are ultimately reprocessed for use in future manufacturing. No eWaste is exported, incinerated or sent to landfills.
Note: All data reflects Abbott activities in 2012. Some content has been adjusted to remove data specific to AbbVie, which became a separate company on Jan. 1, 2013.